Over the past year you may have heard about a class-action lawsuit against the real estate industry alleging collusion, price fixing, price gouging, client abuse – all sorts of nefarious things.
News media spilled thousands of gallons of ink, not to mention billions – maybe trillions – of pixels, on this story – boiling a complex situation down into simplistic terms that were often misleading and usually tilted toward the plaintiffs’ position.
The suit alleged that realtors were fixing prices by forcing a 6% commission on sellers which hurt both buyers and sellers by making the process unnecessarily expensive. If the prices weren’t “fixed” everyone could negotiate commissions – sellers could pay what they wanted to pay, and buyers could pay what they wanted to pay – and everyone would be better off. Real estate nirvana achieved!
However, the truth is that seller commissions have never been fixed. They have always been negotiable and voluntary. Most sellers agreed to 6% – to be split 50/50 with the buyer’s broker – because that was the best way to generate the most interest in the property, and therefore best way to get offers.
On Friday, March 15, the National Association of Realtors announced they were settling the suit (caving, in the view of many of us) – resulting, according to the media, in big changes. No more “fixed” 6% commissions, transparent transactions, dramatic savings for clients, millions of realtors leaving the business. And so on …
The truth of the matter is different, and somewhat less dramatic, than you may have read. Here’s the deal – post-settlement changes boil down to two things:
One: The settlement prohibits listing agents from advertising via the multiple listing service (MLS) the commission they are offering the buyers’ broker. We can still offer 3% commission, and we can still advertise it – just not via the MLS. We will still offer it, and buyers’ brokers will still ask for it. As always.
Two: Buyers’ agents cannot show a property listed in the MLS without a signed Buyer Representation Agreement. This is a good thing. Signing a client to a listing agreement and/or a buyers’ rep agreement is the perfect opportunity for a clear explanation of commissions, who pays them, and how much they are. Conscientious realtors – like me – have always done this anyway, but now everyone will have to.
That’s the upshot. Two changes.
Certain areas in the Northwest enacted these very changes several years ago, and they have had no appreciable impact on the market. So, on we go – more-or-less as before. Nashville realtors will still work hard for their clients and earn our commissions. Seems fair to me.